Noonan says EU triple-A states most against directly recapitalising banks

SOME EURO ZONE countries supported Ireland’s position on allowing the euro area’s bailout funds to recapitalise banks directly, without loans being added to the public debt burdens of the states involved, according to Minister for Finance Michael Noonan.

Mr Noonan told the Oireachtas select subcommittee on finance that the view is not very strong among the triple-A-rated countries – the handful of euro zone member states that are viewed as being most solvent by credit rating agencies.

“He who pays the piper calls the tune,” he said.

Mr Noonan was taking questions from members of the committee as the Bill allowing the ratification of the treaty on the European Stability Mechanism, the euro zone’s new permanent bailout fund, makes its way through the Oireachtas enactment process.

The Bill, which is needed to allow Ireland to ratify the ESM treaty, passed the second stage in the Dáil last week.

Mr Noonan has previously described the establishment of the ESM as being of great importance to Ireland as an insurance policy and safety net.

At the committee meeting today he reiterated the Government’s position that he continues to pursue a change to the manner in which the bailout funds operate so that any future bank recapitalisation could be funded directly from euro zone funds.

Responding to a question of possible future changes to the ESM, Mr Noonan said this would involve a second ratification process, rather than halting the current process, because some countries had already ratified it.

Halting the ongoing ratification process would be “unfair” to others he said.

Fianna Fáil TD Michael McGrath described as “folly” adding €100 billion to Spain’s national debt, agreed last weekend as a means of bailing out its banking system.

Mr McGrath said the reason the borrowing costs for the Spanish government have soared since last weekend is precisely because of this agreement and the failure to allow a direct euro zone racapitalisation.

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Mr Noonan said “we are in a very difficult period in European affairs”.